It's gat's off this morning to the Tax Justice Network who have published a long analysis of a new memo published by the US Treasury that seems to be declaring tax war on Europe as a result of the Apple tax case and the threat of further, similar actions. I'm not going to repeat the TJN analysis here, I simply recommend reading it.
I do have some thoughts to add though.
First, this looks like the end of the OECD BEPS process before it ever really got started. The threat is all too clear.
Second, this looks like the US saying no to country-by-country reporting as well. The threat is already known.
Third, it seems as if the US is saying no US company can be taxed by anyone but the US, which is the tax residence basis gone mad (to pout it politely). The language used implies nothing else.
Fourth, there appears to be no hint in here of the US showing any signs of cooperation where at present it is refusing to cooperate, on issues like in formation exchange for example. Its position here is preposterous: it demands every nation on earth supply it with data on the taxable income of US citizens and refuses to supply any data in return. The hypocrisy is staggering.
Nor is there, fifthly, any sign in here that the US is going to get to grips with the fact that states like Delaware, Nevada and Wyoming produce secret corporations available for tax abuse behind total veils of secrecy on such an industrial scale that it makes the British Virgin Islands like like a bunch of amateurs. The contribution to tax abuse that these US states makes is enormous.
And sixth, all of this is before the threat of Trump.
The risk of tax war is real.
But given how absurd is the US position the EU would have no choice in that case but to go its own way, impose CBCR, uphold BEPS and strike out against tax havens all on its own. After all, it had to do this in 2001 when George W Bush refused to cooperate with the OECD and eventually the US came back to the table. It will be time for the EU to do so again. Hopefully assisted by the UK. But one can't be sure about that these days.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
Two things stand out here. The first is this additonal evidence of the powerful influence of the rent-seeking corporate capitalists in the US. The second is the dominance of US-origin firms in global rankings and their accompanying global reach. The two may not be unrelated. Since the US regime allows these firms to “offshore” and minimise their tax liability the US is probably the largest implicit provider of state aid on the planet. And this is on top of all sorts of additional explicit subsidies and tax breaks.
Any US administration, since all have been so totally suborned by the top corporate capitalists, will literally go to war to stop governments in other jurisdictions increasing their capture of this US state aid in the form of increased tax revenues.
Political and popular pressure in the US will place limits on the implicit state aid and on the tactics used by these firms to minimise taxation. Excessive use of offshore tax havens or large-scale inversions (or other shenanigans) that are solely tax minimisation ruses are increasingly frowned upon. As a result, these firms are being encouraged – or choosing themselves – to route more business through smaller OECD member economies with, ahem, accommodating, tax regimes. For example, the Leprechaun Economics of the Irish (“Sor, you’ve luggin’ around a very heavy pot of gold lookin’ for a safe home. We’ll mind it for you and you’ll find our charge for minding it is very small. Sure, we’ll look after it like ’tis our own.”), the “comfortable” arrangements in Luxembourg and the Dutch “facilitation” of tax minimisation are favoured over those of other jurisdictions.
But, ironically, the European Commission is coming under increased pressure to crack down on these practices. And the member-states themselves have being taken some belated steps to ban or phase out the most egregious ruses.
The “bottom-line” here is that the US may be prepared to accept some capture of the state-aid it is providing by the lower tax EU regimes, but it will strongly resist any increase in the capture and will cut up very rough if there is any attempt to impose a claw-back of what the Commission might define as previous underpayment of tax.
There will be a lot of ‘behind-the-scenes’ diplomacy to sort this out. One thing we can be sure is that the ordinary citizens won’t win.
Thanks
Your fourth point re mutuality in the tax information exchange sphere is of course to continue. Because it has one ” Trump” hand — the world s only truly reserve currency ( still, just about).
Ergo as you know this means that if a jurisdiction ” revolts” and refuses to honour FATCA on suppliant knee their banks will be shut out from the eurodollar, petrodollar and every other dollar market which they need to access to effect international payments ( pace Russia China Iran et al who may possibly trade with themselves in renmimbi — big deal).
Thus until US financial hegemony is toppled ( when if ever?) they are the masters viz ” you lot honour FATCA from us and we ll honour whatever we feel like– if anything– from you dross”
Until that chsnges they reign supreme.
Richard
Thanks for that timely alarm-bell-ringing. Most illuminating.
For me it comes as further reinforcement of a growing suspicion which, I believe, is being increasingly manifested among Europeans in general (though the French, God bless ’em, never had any illusions to start with), namely that the interests of the USA and of Europe are becoming increasingly divergent, whether one considers the economic aphere or that of foreign and defence (perhaps spelt “defense”) policy-making.
Within both Obama administrations defense and foreign policy-making has been captured by the neo-cons (people like John Boulton for instance; if anyone had told me in 2008 that his name would ever figure in a Democratic president’s administration I’d have laughed like a drain – but, there he is, large as life). Under that malign influence and not entirely divorced from neoliberalism in the socio-economic sphere, the USA has become unashamedly bent upon the same course as every empire before it in history (including ours). whilst it has an overwhelming military capacity, however, it can’t unlike earlier empires use it full-out because that would risk igniting a mutually self-destructive nuclear holocaust. trade dominance has always been an accompaniment of imperialism, but the USA has elevated it – and does increasingly – into being the main weapon in its armoury, the goal being total hegemony for the USA over as much of the planet as cannot succeed in holding its advance at bay. Neo-colonialism allied with neo-feudalism (see Michael Hudson’s blog fo elucidation). Currently the chief impediment is the BRIC countries some of which (Russia especially) are in consequence in a state of seige by the USA and (via its stooge, NATO) its allies – including little. powerless, us.
Our interests, on the other hand, would (especially after Brexit’s completion) be best served by non-alignment *including* leaving NATO (albeit cautiously tempered by bilateral, limited, mutual-defence arrangements with certain other powers), maintaining only a very wary arms-length relationship with the USA (and a closer one with Russia and the other BRIC countries, as well as the EU), complete free trade, and a tax-haven-free (some hopes!) world in which the efforts of global corporations to secure special privileges (and most especially the incorporation of those into massive USA-sponsored regional trade agreements) are vigorously resisted by a powerful concordat consisting of states other than the USA – for which as already argued they are designed to be a principal instrument, a trojan horse, towards achieving global dominance.
It’s time we woke up and started attending as assiduously to the pursuit of our own geopolitical interests as the Americans have now long been in relation to theirs, which most emphatically are *not* ours.
And BTW the influence of the neo-cons looks set to be perpetuated into a Clinton administration if she wins, since Hilary far from doing anything to clip their wings when S of S actually sang from the neo-con hymn sheet.
Better dust-off that old tin-helmet before some idiot overdoes the brinkmanship by poking the Russian bear once too often.
You have been warned!
Excellent post, Richard. Shame the FT team can’t expand the analysis like you. Just thought that the change of ownership doesn’t seem to have made any difference.
I’m reading lately how other countries are banding together to form a blockchain process which would precipitate the end of the dollar as the world’s reserve currency. That’s quite apart from the way the Chinese are flexing their financial muscles lately, no doubt with the same goal at least partly in mind. In wrestling parlance, the USA’s recent action would be labelled a ‘desperation move’, which I think is self-explanatory. Given what they’re up against, I doubt the dollar or the USA will be a problem for much longer.
Point 6: actually, the one possibly beneficial thing in this is that it may shoot Trump’s fox.